Bumpy Ride Ahead — Expect Some Delays For Certain Loans
I asked my friend David Gaffin, Senior Mortgage Banker and Branch Manager at Fairway Mortgage – Hudson (DGaffin@fairwaymc.com), whether and to what extent the federal government shutdown is affecting real estate closings in Massachusetts. Here’s what he has to say.
Fannie Mae, Freddie Mac Loans — Mixed Bag on Impact/Delays
In general, the shutdown doesn’t impact loan processing at these agencies because they’re not funded by the government. If you’re a federal worker or contractor, however, and your lender cannot get a verbal verification of employment from your federal employer prior to loan delivery, your loan approval may be denied or delayed. Verification of employment is a key requirement to get a loan from Fannie Mae and Freddie Mac, and the agencies cannot buy loans in which a borrower’s employment — and ability to repay — hasn’t been fully vetted. Also, if you loan requires SSA or IRS tax transcript verification, there could be delays, as discussed below.
FHA Closings May Be Delayed
With fewer staff working at FHA, some borrowers may see a closing delay due to increased backlog. Systems and functions that will NOT remain available during the shutdown are:
USDA Loans Will Be Impacted
It appears that the shutdown will have a significant effect on USDA loans.
SSA (Social Security Administration) Verification Impact
To process a mortgage application, lenders verify that your Social Security number is valid with the Social Security Administration. With significant delays expected in processing these requests, government-sponsored agencies have relaxed their rules to allow lenders to submit these reports prior to loan delivery rather than earlier in the loan process. If your Social Security number cannot be validated prior to this time, however, your loan could be denied.
NFIP (National Flood Insurance Program)
Internal Revenue Service — Tax Transcripts Back Online
As part of the usual underwriting process, lenders request copies of a borrower’s tax transcripts from the IRS. Originally, the IRS suspended processing tax transcript information when the shutdown began, but as concerns about a prolonged shutdown heightened, trade groups – including the Mortgage Bankers Association – lobbied the IRS to reconsider. The IRS will resume processing lender requests for tax transcripts to verify income for mortgage applicants despite the government shutdown. In a letter released Monday to participants of its Income Verification Express Service, the IRS said it will begin working through the backlog of requests that have piled up since December 22 and that the employees involved will return to work. There still could be delays in obtaining tax transcripts.
If you have any further questions about the impact of the federal government shutdown on Massachusetts real estate and loan closings, feel free to contact David Gaffin directly at email@example.com or Tel: 508-683-0383